Mobile payment in China

Recently astonished by a digital action I’ve taken last week, I decided to share it with you dear visitor. As a matter of facts it really changed my everyday life here in China.

Imagine a freshly arrived International student in Shanghai. Defined in his country of origin as being part of the ‘connected generation’ and aware about digital tendencies. Now imagine that same person receiving a huge slap in his face after experiencing a payment with his mobile in China. How could it be, right? Here we go!

Let’s start with a short reminder of the basics

Concretely mobile payment is paying through your mobile. Many apps, such as WeChat or Alipay are providing this service. Also major smartphones companies are integrating this mobile payment into their phones; such as Apple Pay or Samsung Pay.

Where is this money coming from?

First, you send your money from your credit card to your app, as an online payment. You just transferred money, from your card, to the app on your phone.
It gets interesting because you empower your money with the functionalities that digital offers: traceability, immediacy, security, dematerialization etc.

About the Actors

In China there was one main actor in the mobile payment: Alipay, developed by AliBaba. But since 2014, WeChat, developed by Tencent, integrates WeChat Pay (32% market share in 2016). In 2016 they approximately represent 90% of the market in mobile payment in China.

Alipay registered in 2016 an average of 175 millions transactions per day, and more than 400 millions accounts. As a comparison, PayPal latest account update was around 190 millions.

What service do these apps provide?

These apps can allow you to:
– Transfer money between users (peer to peer)
– Pay online, with offline retailers (brick and mortar companies)
– And so many crazy things that we will explore in coming articles

Let’s get back to my astonished experience that blew my mind, as hard as Chinese fake alcohol could do.

Friday during the lunchbreak, you hear about a great street food noodle maker. Once you get there you notice that the most expensive asset of the restaurant is probably the smartphone of the owner.

There is a QR Code printed on the desk of the restaurant, and by scanning it with WeChat, it asks you how much you want to pay. Suddenly this street food restaurant is the most high-tech restaurant you’ve ever seen.

Once you entered the amount of the transaction, and your security code (or Touch ID) the money leaves your digital wallet and immediately arrives into the sellers one! You just paid without even touching your physical wallet, a great example of dematerialization by technology.

Why is that amazing?

The fact that this street food restaurant has a QR code and gets paid by mobile payment represents the maturity of the market in China. You can pay every single thing with your mobile, from the taxi to a mojito at a bar. Almost every Chinese has a smartphone (700 million active WeChat users in China).
WeChat registered more financial transactions in one day (Chinese new year of 2015) than Paypal did in one year! Chinese have embraced the mobile payment.

Also, WeChat and Alipay are becoming platforms, in which they integrate all the actors of your life. You can pay your water, electricity, internet bills directly through Alipay. All this represents a huge amount of cash flow, data, and change, in the customer’s habits.

We’ve arrived to the end of the golden era of Apps. We will now arrive to the integration era, via platforms. Winners will be the ones with platforms that are at the core of customer needs.